Subtract your adjustments from your total income also called above the line deductions you have your agi. Withholding doesn t reduce gross income but it s not as easy as.
Here s how you work out your agi.
Gross income on w2. Taxable income starts with gross income then certain allowable deductions are. And parking and transit fees. You d report that amount rather than the 62 000 total on your taxes.
On a w 2 tax statement an employee s federal taxable gross wages appear in box 1 which is located near the top center of the form. However say that you contributed 2000 to a traditional ira and paid off a student loan interest of 1 200. Gross income is all income from all sources that isn t specifically tax exempt under the internal revenue code.
Start with your gross income. Flexible spending accounts for dependent care assistance. Your gross income on your w 2 shows your earnings for the year minus premiums or contributions paid toward pretax or salary reduction plans.
Gross pay does not take into account any pretax deductions or other exemptions from income. Your w 2 would show 56 500 of taxable income in box 1. For example if your w 2s and other income equal 56 000 and you have 15 000 in allowable expenses your adjusted gross income would be 41 000 56 000 15 000.
Such plans include section 125 medical dental vision life and accident insurance. Once you have a tally of all your expenses subtract that amount from your gross income. Add these together to arrive at your total income.
For example if your company pays an employee 4 000 each month the employee s gross wages for the year. Income is on lines 7 22 of form 1040. Gross pay meaning gross pay is the starting point for determining a person s tax obligation.
If your w 2 shows that your taxable wages earned are 61 000 and there is an additional 1 000 in investment income and 500 in taxable interest then your total taxable income is 61 000 plus 1 000 plus 500 which adds up to 61 500.